House prices rmeained virtually static last month increasing by a mere 0.1% in May, the smallest monthly rise since January's 0.2% fall according to the latest figures from the Halifax.
But the annual rate, at 9.1%, is the highest for 14 months, the average house price now stands at £178,997.
The banks says that, as expected, technical factors - specifically that corresponding figures last year were weak - and recent momentum in the housing market caused house price inflation to pick up in early 2006.
But, it adds, the much stronger pattern of house price growth in the second half of 2005 compared with the first half should mean that annual house price growth moderates during the second half of 2006.
Halifax argues there are signs that housing market activity may be beginning to level out. The number of mortgage approvals to fund house purchase fell in April for the second time in four months with the number of loans 11% below January's peak of 119,000, according to the Bank of England.
Meanwhile the pressures on the household sector resulting from higher unemployment and significantly higher household bills, together with the current high level of house prices in relation to earnings, are likely to constrain housing demand and curb house price growth and activity over the remainder of 2006, it adds.
Martin Ellis, chief economist at the Halifax, says a combination of factors is expected to cause activity and house price inflation to ease over the remainder of 2006.
Ellis says: “Labour market conditions have softened recently despite the upturn in overall economic activity. The number of people unemployed in the three months to March 2006 was 44,000 higher than in the preceding three months and up 177,000 compared with a year earlier.
“Substantial increases in utility bills and above inflation council tax rises are also putting pressure on householders' finances.“
The pressures on the household sector resulting from higher unemployment and significantly higher household bills have also contributed to a slowdown in consumer spending growth.
Ellis says these pressures, together with the current high level of house prices in relation to earnings, are likely to constrain housing demand and curb house price growth and activity.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Matthew West on 020 7484 9893 or email [email protected].IFAonline
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